Nationalisation: the politician’s route to money and power

In South Africa, the cry is now to nationalise the mining industry, South Africa’s largest industry. This is hardly surprising seeing that a left wing cabal of communists and radical trade unionists now runs the country. The ruling party itself is slightly reticent, presumably having been informed what a devastating effect it would have on the economy.
South Africa’s mining industry is struggling at the moment with big declines in commodity prices, and also having lost out disastrously on the global commodity boom over the past few years. And why did they lose out? Because the government nationalised (confiscated without compensation) the country’s mineral rights. And then half-heartedly granted mining licenses in a haphazard and hopelessly inept way. Billions of dollars were wiped from the asset base of the mining companies and billions of dollars of investment withdrew from South Africa.

But this is not enough for our lefty cretins. No they think a bunch of uneducated comrades (okay, maybe unfair – educated in Progressive Economics in the GDR), who couldn’t run a spaza shop, would do better than highly qualified, experienced and effective mining professionals who have detailed and informed understanding of their businesses. They seem to think that it’s unfair of the mining companies to retrench thousands of workers just because their revenues can’t justify the payroll. So presumably they will either invent a new version of reality where market forces play no role in company revenues, or they will just plunder the long-suffering and by-then-impoverished taxpayer to pay handsome wages to millions of unproductive workers.

There are two ways to achieve this. Either expropriate the companies and compensate them based on a some sort of agreed formula, or simply steal them, like they did the mineral rights. Since the stealing option is constitutionally tricky, they will probably go for a compensated expropriation, but at a hugely discounted price. By the government simply announcing its intention to nationalise, the mining companies would lose significant value overnight. So the government could pick up a bit of a bargain. Of course, at the price of wholesale withdrawal of foreign investment and the collapse of the mining industry.

So why would they want to do this? After all they have an extremely poor track record of running state enterprises. These are almost all in dire financial straits through gross mismanagement, nepotism, rampant corruption and poorly skilled, unmotivated workers.

The answer I think is that the ruling cabal have demonstrated that they care absolutely nothing for the country, its people or its constitution. They care only about enriching themselves. And getting their greedy snouts into the mining industry trough will do very nicely in feeding their ever-increasingly lavish lifestyles. And of course the patronage that follows from central control guarantees a firm, long-term grip on the ruling throne.